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Audit
The effect of company report lag
characteristics and auditor
characteristics to audit report lag
Muhammad Rifqi Abdillah, Agus Widodo Mardijuwono and 129
Habiburrochman Habiburrochman Received 24 May 2019
Department of Accounting, Fakultas Ekonomi dan Bisnis, Revised 8 June 2019
Accepted 15 June 2019
Universitas Airlangga, Surabaya, Indonesia

Abstract
Purpose – The purpose of this paper is to examine and analyze the factors that affect an auditor’s efficiency
in completing the audit process proxied by audit report lag. The factors used in this study are selected by
looking at the characteristics of the company and the characteristics of an auditor.
Design/methodology/approach – Company characteristics were proxied by the audit committee
effectiveness, financial condition, accounting complexity and profitability, whereas auditor characteristics
were proxied with auditor reputation, audit tenure and auditors industry specialization. Populations of this
study were all manufacturing companies listed in Indonesian Stock Exchange in 2014–2016. Based on the
purposive sampling method, the number of samples obtained from 231 companies was 77. Multiple linear
regression method was used to analyze this study. Hypothesis testing was done by statistical t-test (partial).
Findings – The results showed that partially variables of the audit committee effectiveness and profitability
had a significant negative effect on audit report lag while the variable financial condition had a significant
positive effect on audit report lag. Meanwhile, variables of the accounting complexity, auditor reputation,
audit tenure and auditors’ industry specialization did not show significant influence on audit report lag.
Originality/value – This study tests both company’s and auditor’s characteristic on audit report lag that as
far as authors know never been tested simultaneously.
Keywords Audit committee effectiveness, Accounting complexity, Auditors characteristics,
Financial condition, Firms characteristics
Paper type Research paper

1. Introduction
Shareholders are entitled to obtain information on the financial condition and results of the
company’s operations. The information is used by the shareholders to evaluate the
performance of the management and make a decision on whether the company is providing
benefits or not to them. Therefore, the financial statements are a form of management
accountability for the management of the entity’s resources entrusted to it. In addition, the
financial statements are also a means of communication of the management to shareholders.
In order for the financial statements to be valuable to the user at the time of decision
making, the financial statements should contain qualitative characteristics that are
characteristic of financial statement information. The qualitative characteristics of financial
statements based on the Basic Framework of Preparation and Presentation of Financial
Statements of Financial Accounting Standards are understandable, relevant, reliable and
comparable. Relevant qualitative and reliable qualitative characteristics are the primary
quality characteristics of a financial report. The financial statements are said to contain

© Muhammad Rifqi Abdillah, Agus Widodo Mardijuwono and Habiburrochman Habiburrochman.

Published in Asian Journal of Accounting Research. Published by Emerald Publishing Limited. This Asian Journal of Accounting
article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may Research
Vol. 4 No. 1, 2019
reproduce, distribute, translate and create derivative works of this article (for both commercial and pp. 129-144
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2443-4175
terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode DOI 10.1108/AJAR-05-2019-0042
AJAR relevant information if the financial statements have the ability to influence the decision of
4,1 the manager or users of the financial statements so that the existence of the financial
statements is able to alter or support their expectations about the results or consequences of
the action taken.
Delivery timeliness of financial statements to the public is essential to maintaining the
relevance of information in the financial statements. Due to inadvertent delays in the
130 delivery of financial statements, the information generated in the financial statements will
lose the ability to influence user decisions (Praditya dan Fitriany, 2013). For investors, the
timely delivery of financial statements will reduce uncertainty in investment decision
making (Ashton et al., 1989) and the dissemination of asymmetric information among
investors in the capital market ( Jaggi and Tsui, 1999). Timely delivery of financial
statements will help to reduce the occurrence of leak, rumors and insider trading in the stock
market (Owusu-Ansah, 2000). Timeliness of financial statement submission also provides
valuable information for shareholders in the decision-making process (Al-Ajmi, 2008).
Therefore, the Capital Market and Financial Institution Supervisory Agency (Bapepam
and LK) make regulations regarding the deadline for submitting financial statements.
The role of Bapepam and LK was replaced by the Financial Services Authority (OJK)
starting on October 27, 2011 in Law No. 21 of 2011. The regulation governing the deadline
for submission of annual financial statements of an issuer or a public company shall be the
Decision of the Chairman of the Capital Market Supervisory Agency Number KEP-346/BL/
2011. In Rule Number XK2 stating the annual financial statements shall be presented
comparative with the same period of the previous year, shall be accompanied by an
accountant’s report in the context of an audit of the financial statements and shall be
submitted to Bapepam and LK and announced to the public no later than the end of the third
month after annual finance report. However, for companies whose shares are listed on the
Foreign Exchange, the date of submission of the financial statements follows the date set by
the Foreign Exchange.
However, the timeliness of the delivery of financial statements in accordance with the
prevailing regulations is confronted with obstacles, one of which is that financial statements
should be audited by independent public accountants. The timeliness of the delivery of
financial statements depends on the period of completion of the audit process. This is
because the financial statements cannot be published before the audit is completed
( Johnson, 1998).
In the process of completion of the audit, the auditor must comply with the auditing
standards set by the Public Accountant Association. One of the auditing standards that
must be met by an independent auditor is the Standards of Field Work. In addition, in the
implementation of the auditing standards, the auditor should also consider the audit risk
to be faced. Therefore, for the fulfillment of audit pelakasanaan according to standard
and because of audit risk encountered auditors require a longer time in the process of
completion of the audit so that this will impact on the timeliness of financial reporting.
Essentially, the timeliness of audit task completion indicates that the auditor should
work efficiently without overriding the reliability of the information generated in the
financial statements.
This study aims to determine the factors that affect the efficiency of time in the
assignment. Researchers produced time efficiency in the assignment by using an audit
report lag. Understanding of the factors affecting the audit report lag will likely provide an
understanding of the efficiency of time in audit assignments (Habib and Bhuiyan, 2011).
Some previous reports of audit report lag are often called auditors’ signature or audit delay.
Al-Ajmi (2008) defines auditors’ signature lag, i.e., the number of days starting from the
closing date of the company’s book until the auditor’s signature date in the audit report after
the auditor makes an opinion regarding the company’s financial statements.
 The factors that affect audit report lag have been examined by some previous research Audit
studies, they have been examined in the country and abroad. Related to these research report lag
studies, researchers choose factor or variable that influences audit report lag by looking
from the side of company characteristic and auditor characteristic. Previous research has
shown that factors affecting the length of audit report lag are related to corporate
characteristics, such as industry size, the presence of extraordinary items, etc. (Ashton
et al., 1989), and auditor characteristics, such as the breadth of the auditor’s work, the 131
experience of the audit staff, the auditor’s insensitiveness and tenure audit (Bamber et al.,
1993). This study focused on factors derived from firm characteristics and auditor
characteristics. This is because the main factor causing the length of audit report lag
comes from within the two entities. Each company (auditee) has different characteristics
so that the risks faced and procedures used by the auditor will also be different while
the auditor as the executor also has different skills and expertise in conducting a
corporate audit.
Corporate characteristic factors that influence audit report lag include the effectiveness
of the audit committee, accounting complexity, financial condition and profitability. The
researcher chooses the firm characteristic factors based on the auditor’s responsibilities
and the testing procedures that the auditor must perform during audit assignments such as
non-substantive and substantive testing.
In addition to factors from the side of the company that affect audit report lag, factors
from the auditor’s side also influence the report lag. Auditor characteristic factors that affect
audit report lag include auditor reputation, audit tenure and auditor industry specialization.
The remainder of this paper is structured as follows. Section 2 develops the literature
review. Section 3 describes the research methodology. Section 4 specifies the empirical
results. Section 5 discusses results and Section 6 summarizes the paper and presents
concluding remarks.

1.1 Research problems

Based on the background described earlier, the issues discussed in this research are:
(1) Corporate characteristics consisting of the effectiveness of the audit committee,
financial condition, accounting complexity and profitability affecting audit report
lag; and
(2) Auditor characteristics consisting of auditor reputation, audit tenure and industry
specialization affecting audit report lag.

2. Literature review
Agency theory provides an explanation of the agency relationship; it is the relationship
between the owners of the company or shareholders as a principal with the management
company as an agent. In the agency relationship, there is a contract between one or more
persons domiciled with another person who is an agent to perform a work in accordance
with the principal’s interests, accompanied by the delegation of decision-making
authority to the agent ( Jensen and Meckling, 1976). This agency theory is motivated by
the existence of principals or shareholders who are not possible to carry out all the
functions required in the management of a company due to the limited ability, time, etc.,
so that the principal appoints the agent of company management to replace the task of
managing the company’s activities (Sudana, 2011). The existence of a conflict of interest
between the agent and the principal can lead to the asymmetry of information that is the
imbalance of information owned by both parties where the agent has more information
than the principal about the company. This is because management as a party has more
AJAR detailed information about the company to hold or not provide perfect information to the
4,1 shareholders because it is more profitable for management.

3. Research methodology
3.1 Operational definitions
3.1.1 Audit report lag. Audit report lag is the length of days required by the auditor to
132 complete the audit process of the company’s financial statements after the closing date of
the company’s books (Carslaw and Kaplan, 1991; Bamber et al., 1993). The lag report audit is
measured by counting the number of days after the closing date of the company’s book
( January 1) up to the date of signing of the independent auditor’s report (LAI) by the auditor
stated in the company’s audited financial statements.
3.1.2 The effectiveness of the audit committee. The effectiveness of the audit committee is
an audit committee that qualifies members with the authority and resources to protect the
interests of stakeholders by ensuring the reliability of financial reporting, internal control
and risk management, as well as through diligent monitoring. This variable is measured by
summing the scores of the committee effectiveness index built by DeZoort et al. (2002). The
index consists of four elements, namely, composition, authority, resources and persistence,
which are then divided into ten requirements. Higher scores indicate that audit committees
are more effective. The measurement of the effectiveness of variables of the audit committee
are described in Table I.
3.1.3 Financial condition. The probability of bankruptcy is used as a proxy in assessing
a company’s financial condition as measured using the Zmijewski Model (Habib and
Bhuiyan, 2011). The Zmijewski Model is based on several financial ratios: return on assets
(ROA) (net income/total assets), financial leverage (total debt/total assets) and liquidity
(current assets/current debt). The formula of Zmijewski Model is as follows:
ZFC ¼ 4:336–4:513ðROAÞþ5:679ðFINLÞþ0:004ðLIQÞ:

Dimensions Proxy Score Source

Composition Independence 1: if it meets the Ika dan

All members are independent external parties requirements Ghozali
Expertise 0: does not meet the
At least one member has educational background and requirements
expertise in accounting or finance
Resources Audit committee size 1: if it meets the Ika dan
The number of audit committees has at least three members requirements Ghozali
0: does not meet the
requirements
Authority Charter of the Audit Committee 2: if explaining in Ika dan
Proxy reports relating to audit committee charter detail Ghozali
The assignment of responsibilities 1: a brief statement
a. Supervise the company’s financial information 0: do not reveal at all
b. Supervise the activities of external auditors
c. Overseeing the effectiveness of corporate internal control
d. Oversee the company’s compliance with the rules
Table I. Perseverance Meeting 1: if it meets the Ika dan
Measurement of the Intensity of meeting at least four times in one-year requirements Ghozali
effectiveness of the Voluntary disclosure 0: does not meet the
audit committee There is a voluntary disclosure report of the audit committee requirements
From the Zmijewski Model, if the higher ZFC value indicates the higher the level of Audit
bankruptcy or financial failure of the company that raises the risk of high audit so report lag
increasing ARL.
3.1.4 Complexity of corporate accounting. Accounting complexity is the complexity of the
accounting process that occurs in an enterprise caused by the company, which has several
segments or subsidiaries that operate. In accordance with Sengupta (2004) and Al-Ajmi
(2008) studies, accounting complexity was measured using dummy variables. If the firm 133
reports more than one major segment, it gets a score of 1, vice versa if the company only
reports one major segment, then scores 0.
3.1.5 Profitability. Profitability is the company’s ability to generate profits using
company-owned resources, such as company assets. Profitability is measured by using
profitability ratio, i.e., ROA. The greater ROA of the company gains shows the more efficient
use of company assets to generate profits. In this study, ROA is formulated as follows:
ROA ¼ Net income=Total assets:
3.1.6 Auditor reputation. The reputation of the auditor (KAP) is a public trust that is held
by the auditor (KAP) on behalf of the big one it has. The auditor’s reputation is divided into
two major groups: Big Four and Non-Big Four KAP. Auditor reputation variables are
measured using dummy variables. Companies that are audited by the Big Four will
be scored 1, whereas companies audited other than the Big Four will be scored 0.
3.1.7 Tenure audit. Tenure audit is the length of the engagement period between the
auditor (KAP) and the auditee associated with the use of audit services that have been
agreed on an ongoing basis without any change with the other auditors. In identifying the
appropriate audit tenure, caution and compliance with applicable regulations are required.
This is related to the existence of the problem of KAP rotation in pseudo where there is a
rotation of KAP but substantially KAP is still the same KAP. Therefore, in this study
measuring the audit tenure only uses real rotation. This is because of the experience and
understanding of the auditor to the client in accordance with the duration of the provision of
audit services in real terms.
3.1.8 Specialization industrial auditor. The auditor that specialists say is an auditor who
has a specific understanding of a particular industry that causes them to gain a more
comprehensive understanding of the industry’s characteristics (Maletta and Wright, 1996;
Owhoso, 2002). Specialist auditors are measured using dummy variables. The industry-specific
auditor will be given a score of 1 while a score of 0 is given to auditors who do not have an
industry specialization.
The measurement of auditor industry specialization refers to the research of Gul et al. (2009)
using the market share approach. The approach can be identified by using the percentage of
total assets of a company audited by a firm in a particular industry. The formula of the
approach model is as follows:
Jumlah Klien KAP dalam Industri Rerata Aset Klien KAP dalam Industri
SPEC ¼  :
Jumlah Seluruh Emiten dalam Industri Rerata Aset Seluruh Emiten dalam Industri

From the above formula, the auditor is said to have an industry specialization if the SPEC
amount is equal to or greater than 30 percent, according to Reichelt and Wang (2009) research.

3.2 Types and data sources

The type of data used in this study is quantitative data. Quantitative data are data in the
form of numbers. Due to its shape, these data can be processed and analyzed using
AJAR mathematical calculation techniques or statistics. In this research the data source is
4,1 secondary data. In this study the required data are data in audited financial statements
(audited financial report) and annual report (annual report) of a company during the period
2014–2016, obtained from the website of Indonesian Stock Exchange (www.idx.co.id).

3.3 Method of collecting data

134 Prior to conducting the research, the researcher must design how the procedures or steps are
performed to collect the data. Data are collected from data sources. Due to data source use
secondary data that are data in audited financial report (audited financial report) and
company annual report; hence, the method of collecting data used in this research is the
method of documentation. Researchers see the document in the form of audited financial
statements (audited financial report) and the annual report of the company.

3.4 Data analysis technique

The analysis technique used in this research is multiple linear regression analysis
which is used to know the influence of independent variables (effectiveness of audit
committee, financial condition, accounting complexity, profitability, auditor reputation,
audit tenure and auditor industry specialization) to dependent variable (audit report lag).
A statistical model is widely used to examine the relationship of influence between the
dependent variable and the independent variable. In this study, statistical calculations
done by using the Statistics Packages For Social Science (SPSS) version 20 program are
as follows:

ARLi;t ¼ aþb1 ACEFECi;t þb2 ZFCi;t þb3 SUBSi;t þb4 ROAi;t

þb5 REPi;t þb6 TENi;t þb7 ASIi;t þƸi;t :

The regression model in this study is as follows:
ARLi,t ¼ audit report lag; α ¼ intercept; ACEFECi,t ¼ effectiveness of the audit committee;
ZFCi,t ¼ financial condition; SUBSi,t ¼ accounting complexity; ROAi,t ¼ profitability;
REPi,t ¼ auditor reputation; TENi,t ¼ tenure audit; ASIi,t ¼ industry specialization of auditors;
Ƹi,t ¼ size of error for company.
In addition, this research uses techniques such as:
(1) Descriptive statistics, which results from descriptive statistics for the variables used
are presented in descriptive statistics tables in the form of maximum values,
minimum values, mean values and standard deviation values.
(2) Test classical assumptions such as normality, multicollinearity, heteroscedasticity
and autocorrelation. They are used in this study and can provide representative
results (BLUE: best, linear, unbiased, estimator).
(3) Testing the hypothesis with t-test. t-Test is conducted to test whether or not the
influence of independent variables to the dependent variable is partially. The test is
univariate by using t-test method. Determination level is of 5 percent.
(4) The coefficient of determination is essentially used to measure the model’s ability to
explain the variation of the dependent variable (Ghozali, 2009).

4. Results
4.1 Description of research variables
(Table II).
4.2 Classical assumption testing Audit
4.2.1 Normality test. Based on Figure 1, it appears that the data spread around the diagonal report lag
line and follow the direction of the diagonal line. Thus, it can be concluded that the P-P plot
graph shows the data are normally distributed.
4.2.2 Multicollinearity test. Based on Table III it is known that all independent variables
(effectiveness of the audit committee (ACEFEC), bankruptcy probability (ZFC), accounting
complexity (SUBS), profitability (ROA), auditor reputation (REP), tenure audit (TEN) and 135
industry) have a tolerance value W0.1 and VIFo10. It can be concluded that all independent
variables in the regression model tested in this study did not occur multicollinearity.
4.2.3 Heteroscedasticity test. The scatterplot diagram in Figure 2 shows that spreading
dots do not accumulate and do not form a distinctive pattern. Thus, it can be concluded that
the results of this test state that the regression model is free from symptoms of
heteroskedastisitas or homoskedastisitas occur.
4.2.4 Autocorrelation test. Based on the Durbin–Watson test presented in Table IV, the
regression for Equation (1) shows the value of 1.687, which means that the Durbin–Watson
value is still in the range of autocorrelation-free regions as they are between −2 to +2.

n Min. Max. Mean SD

ARL 231 40 151 78.15 15.750

ACEFEC 231 4 14 10.55 2.724
ZFC 231 −4.8192 12.9049 −1.794143 2.4232024
ROA 231 −0.1611 0.4317 0.063125 0.0900350
TEN 231 1 6 2.41 1.518
Valid n (listwise) 231 Table II.
Source: Processed results of SPSS data Descriptive statistics

Normal P-P Plot of Regression Standardized

Residual Dependent variable: ARL
1.0

0.8
Expected Cum Prob.

0.6

0.4

0.2

0.0
0.0 0.2 0.4 0.6 0.8 1.0
Observed Cum Prob. Figure 1.
Normality test chart
Source: Processed results of SPSS data
AJAR Collinearity statistics
4,1 Model 1 Tolerance VIF Information

(Constant)
ACEFEC 0.881 1.135 Free multicollinearity
ZFC 0.799 1.251 Free multicollinearity
SUBS 0.933 1.072 Free multicollinearity
136 ROA 0.621 1.610 Free multicollinearity
REP 0.390 2.564 Free multicollinearity
TEN 0.985 1.015 Free multicollinearity
ASI 0.456 2.191 Free multicollinearity
Table III. Note: aDependent variable: ARL
Multicollinearity Source: Processed results of SPSS data

Scatterplot
Dependent variable: ARL
Regression Studentized Residual

–2

–4 –2 0 2 4
Figure 2. Regression Standardized Predicted Value
Heteroscedasticity test
Source: Processed results of SPSS data

Model summaryb
Model Durbin–Watson

Table IV. 1 1.678

Autocorrelation Notes: aPredictors: (constant), ASI, SUBS, TEN, ZFC, ACEFEC, ROA, REP; bdependent variable: ARL
results Source: Processed output results of SPSS data

4.3 t-Test
(Table V ).

4.4 F-test
From Table VI it is concluded that the estimated linear regression model is feasible to be
used to explain the effect of all independent variables on dependent variable.
 Coefficientsa
Audit
Regression model report lag
Model 1 Coefficient t Sig. Conclusions

(Constant) 86.725 18.667 0.000

ACEFEC −0.660 −1.694 0.092** Significant
ZFC 0.888 1.931 0.055** Significant
SUBS 2.210 0.952 0.342 No sig. 137
ROA −31.146 −2.219 0.028* Significant
REP −2.324 −0.704 0.482 No sig.
TEN 0.291 0.441 0.660 No sig.
ASI 2.066 0.594 0.553 No sig. Table V.
Notes: aDependent variable: ARL. *,**Significant at 5 and 10 percent significance levels, respectively Statistical results
Source: Processed output results of SPSS data of t-test

ANOVAa
Model 1 Sum of squares df Mean square F Sig.

Regression 6,183.678 7 883.383 3.872 0.001b

Residual 50,872.019 223 228.126
Total 57,055.697 230
Notes: aDependent variable: ARL; bpredictors: (constant), ASI, SUBS, TEN, ZFC, ACEFEC, ROA, REP Table VI.
Source: Processed output results of SPSS data Test results of F-test

4.5 Determination coefficient test

In Table VII, the value of R2 of 0.108 indicates that the effectiveness of the audit committee,
probability of bankruptcy, accounting complexity, profitability, auditor reputation, audit
tenure and auditor industry specialization are able to explain variations in audit report lag
by 0.108 or 10.8 percent; the remaining 0.892 or 89.2 percent is explained by other variables
outside the independent variables used in the study.

5. Discussion
5.1 The effect of the effectiveness of the audit committee on audit report lag
The audit committee is part of the corporate governance component of the company proven
to reduce audit report lag. There are several reasons that are suspected to underlie this.
First, the audit committee can perform the task of overseeing the financial reporting process
effectively. The audit committee can encourage the management of the company to be able
to deliver the financial statements in a timely manner. Second, the audit committee has an
important role in the effectiveness of the company’s internal controls so that the more
effective the audit committee the more effective the internal control of the company.
The effective impact of internal controls is the decrease in substantive testing conducted by
the auditor due to low risk control so that it can reduce audit report lag. Third, the audit

Model summaryb
Model R R2 Adjusted R2 SE of the estimate
a Table VII.
1 0.329 0.108 0.080 15.104 Coefficient
Notes: aPredictors: (constant), ASI, SUBS, TEN, ZFC, ACEFEC, ROA, REP; bdependent variable: ARL determination
Source: Processed output results of SPSS data test results
AJAR committee also has a role to ensure that external audits are running effectively by
4,1 considering several factors, including independence, scope of assignment, cost efficiency
and objectivity of the external auditor.

5.2 The influence of financial condition on report lag audit

Companies that are experiencing financial difficulties tend to experience longer audit lag
138 reports. It is hoped that a company with a weak financial condition will pose a greater
audit risk of giving an opinion in accordance with the company’s financial condition. To
reduce the audit risk, the auditor will expand its audit procedures so that this will cause
the auditor to take longer time in the audit process. In addition, companies with the weak
financial condition will have problems in terms of going concern, while the auditor is also
responsible for evaluating his or her going concern auditee. Therefore, audit report lag
will be longer if the company is experiencing a weak financial condition or going concern
problem. Auditors will more often discuss and negotiate with their clients to find out
management plans in the face of going concern corporate issues. Not only that, the auditor
is also obliged to evaluate the effectiveness of the management plan in solving the
problem going concern company.

5.3 The influence of accounting complexity to audit report lag

This study did not find any significant effect between variables accounting
complexity proxied with reporting of company segment to audit report lag. The initial
hypothesis argues that firms with high accounting complexity (having more than one
major segment) will result in high levels of audit complexity and audit risk so that it will
make the auditor take longer time in the audit process. However, such matters can be
anticipated by the auditor with careful preparation in the early stages of auditing and an
organized schedule so as to reduce the audit time budget. In addition, firms with high
accounting complexity are also supported by good internal controls so that the audit risk
issues generated will decrease. With good internal controls to make the control risk will
decrease the automatic audit risk will also be reduced so that it can reduce the length of
audit report lag.

5.4 The effect of profitability on audit report lag

The results of this study indicate that the higher the profitability obtained by a company,
the shorter will be the audit report lag, vice versa. This is in accordance with the signal
theory that companies that have good information (goodnews) will give a positive signal to
the public that is by way of delivering financial statements as soon as possible. If the
profitability of a company is higher, then the financial statements produced by the company
will contain good news (goodnews). This is because companies that obtain high profitability
indicate the success of the company’s performance in managing its resources. The existence
of good news encourages the company to ask the auditor to complete the audit process
immediately so that the good news can be quickly conveyed to the shareholders or investors
so that it will impact on increasing the value of the company. On the other hand, audit report
lag will be longer if the company profitability is low. This is because low profitability is bad
news that will have a negative impact on the value of the company such as a bad reaction of
shareholders or investors that allow the impairment of corporate value. To avoid such
things, companies will slow down to publish financial reports to the public. The company
will ask the auditor to schedule a slower-than-expected audit process that will extend the
audit report lag.
 In addition, firms with low profitability (losses) also have greater audit risk because they Audit
are likely to be the cause of financial distress or fraud, thus making the auditor to expand its report lag
audit procedures. This will lead to longer audit lag reports.

5.5 The influence of the auditor’s reputation of report lag’s audit

This research did not find any significant influence between auditor reputation variable to
audit report lag. There are several reasons underlying those results. First, it relates to 139
reputation and credibility. Big Four’s KAP in terms of protecting reputation and credibility
is by convincing stakeholders that they meet all disclosure requirements rather than
prioritizing to complete the audit process as soon as possible. Therefore, this study shows
that firms audited by the Big Four KAP do not result in a faster audit report lag than
companies audited by the Non-Big Four KAP.
Second, many local Non-Big Four KAPs cooperate with other international KAPs, such
as Paul Hadiwinata, Hidajat, Arsono, Achmad, Suharli; and partners affiliated with PKF,
Amir Abadi Jusuf, Aryanto, Mawar & Rekan; affiliated with RSM Tanubrata Sutanto
Fahmi Bambang; affiliated with BDO, Doli, Bambang, Sulistiyanto, Dadang and Ali;
affiliated with BKR, Mirawati Sensi Idris; affiliated with Moore Stephens, and so on. This
makes local KAP not much different from Big Four’s KAP in terms of resources and
technology so audit report lag between KAP Big Four and Non-Big Four does not show
any difference.
Third, in line with the increasingly fierce competition in the business world, all KAPs,
both those with the Big Four and Non-Big Four, wish to retain their respective clients by
working effectively and efficiently in completing the audit process so that audit report lag
between Big KAP Four and Non-Big Four shows no significant difference.

5.6 The effect of audit tenure on audit report lag

This research indicates that audit tenure has no significant negative effect on audit report
lag. This is because all auditors (KAP) are required to work professionally in completing the
audit process in a timely manner so as not to harm the stakeholders who want to use the
financial statements as a means for decision making. It is also in accordance with the theory
of compliance (compliance theory) that it becomes imperative for an individual or
organization such as an auditor to complete the audit process in a timely manner in
accordance with applicable regulations. This is because the regulation has the authority to
dictate or regulate the behavior of individuals or organizations.
In addition, this study is limited to tenure auditors proxied with KAP tenure without
considering individual auditor tenure, while the implementation of the audit process of
financial statements conducted by an auditor or partner of a KAP so that the long audit
engagement between the KAP and the client does not indicate a long audit tenure for an
auditor. This is also supported by the regulation stipulating that the auditor audits the
auditor for the longest time in three consecutive years. Therefore, the results of this study
conclude that longer audit tenure does not make the audit report lag shorter, vice versa.

5.7 The influence of auditor industry specialization to audit report lag

This study did not find any significant influence between the variables of industry auditor
specialization on audit report lag. This is because the auditor’s specialization status cannot
be explicitly identified. According to some sources, there are different methods of
determining industry specialization. Gramling and Stone (2001) and Dunn and Mayhew
(2004) define industry specialization by referring to the market share identified through the
sale of a company to a particular industry, while Balsam et al. (2003) determine industry
specialization with reference to the number of clients in an industry. On the contrary, Gul
AJAR et al. (2009) identifie industry specialization with reference to the total assets of the client
4,1 company. In addition, the auditor industry specialization can also be identified through
auditing fees as used by Habib and Bhuiyan (2011). Therefore, any discrepancies in the
method will result in the absence of consistency over the test results of the auditor industry
specialization on any method used. This study of industry specialization is determined by
using a market share approach that can be identified through the percentage of total assets
140 of a company audited by a firm’s KAP in a particular industry. The auditor is said to
have an industry specialization if the SPEC amount is equal to or greater than 30 percent.
These calculations resulted two KAPs belonging to have industry specialization, and the
two KAPs are EY and PWC. It is alleged that the cause was not found to be significantly the
result of testing the influence of audit industry specialization on audit report lag.

6. Conclusion
(1) The effectiveness of the audit committee has a significant negative effect on the
audit report lag.
(2) Financial condition has a significant positive effect on the audit report lag.
(3) Accounting complexity does not affect audit report lag.
(4) Profitability has a significant negative effect on audit report lag.
(5) The auditor’s reputation has no effect on audit report lag.
(6) Tenure audit has no effect on audit report lag.
(7) The auditor industry specialization has no effect on audit report lag.

6.1 Suggestions
Based on the results of research that has been done, suggestions for further research are:
(1) The value of R2 in this study is still too low that is equal to 0.108 or indicates that the
variables used in the study are able to explain variations audit report lag by 0.108 or
10.8 percent while the rest 0.892 or 89.2 percent explained by other variables outside
variables used in the study. Therefore, for the next researcher it is suggested to
replace or add another independent variable to get higher R2 value.
(2) It is better for the next researcher to use the sample of the research not only in the
manufacturing company so that the results obtained have a wider scope.
Based on the results of the calculation of the specific auditor only two KAPs are obtained, it
is advisable for further researchers to use different measurement methods if still using this
variable and the same sample with this research in order to show better results.

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Corresponding author
Habiburrochman Habiburrochman can be contacted at: habib@feb.unair.ac.id

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